Incident: The company released its 2024 semi-annual report, achieving operating income of 2.15 billion yuan (+11.02%), net profit attributable to shareholders of listed companies of 0.402 billion yuan (+27.28%), and net profit attributable to shareholders of listed companies after deduction of 0.334 billion yuan (+15.19%).
Finished drugs have returned to a growth trajectory, and innovative drugs are expected to start contributing to increased performance. The company strengthened the construction of a marketing network, initiated a sales system upgrade, accelerated the retail business layout, successfully implemented a new marketing business model, and drove the rapid growth of the outside market. In the first half of 2024, the company's finished drug revenue was 1.301 billion yuan (+17.13%). Among them, domestic trade revenue for finished drugs increased by about 16% year on year, and revenue from the outside hospital market increased by more than 80% year on year. We believe that the new sales system will help the company's stock of generic drugs gain more room for growth in the primary market and the out-of-hospital market. Dacinib capsules began to be marketed and sold in March 2024. Currently, more than 200 hospitals have been developed, and it is expected that they will start contributing to increased performance from the second half of 2024.
Operating efficiency continues to be optimized, and there is still room for improvement in profit margins. In the first half of 2024, the company's sales expenses were 0.384 billion yuan (-3.63%), mainly due to a reduction in sales staff and a corresponding reduction in salary. However, the company's finished drug revenue continued to grow rapidly, reflecting the continuous optimization of operating efficiency.
In the first half of 2024, the company completed the first phase of production capacity expansion in Xinchang Daming Pharmaceutical and its new Shandong chemical base, which were put into use one after another. The operating expenses during the same period were 0.128 billion yuan (+47.57%), mainly due to increased depreciation expenses and employee remuneration. We believe that with the gradual release of new production capacity, there is still room for optimization of the company's profit margin.
Profit forecasting and valuation. According to the company's operating conditions in the first half of 2024, we adjusted the profit forecast. The company's revenue for 2024 to 2026 is 4.417 billion yuan, 4.948 billion yuan, and 5.505 billion yuan respectively, with year-on-year growth rates of 10.5%, 12.0% and 11.3%, respectively; net profit to mother is 0.73 billion yuan, 0.798 billion yuan, and 917 million yuan, respectively, with year-on-year growth rates of 17.9%, 9.4%, and 14.8%, respectively Calculated at the closing price on January 22nd, the corresponding PE was 13.4 times, 12.3 times, and 10.7 times, respectively, maintaining the “buy” rating.
Risk warning: Sales of innovative drugs fell short of expectations; prices of generic drugs in stock fell beyond expectations; growth in the API and medical device business fell short of expectations.